OVL to spend $318 million to up Venezuela oil field output

ONGC Videsh Ltd will provide USD 318 million financing to help raise output at a Venezuelan oilfield after the Latin American nation signed pact to supply 17,000 barrels per day of crude oil to India to clear past dues.

OVL, the overseas arm of state-owned ONGC, owns 40 per cent of Venezuela’s San Cristobal oilfield and had invested about USD 190 million in the project in 2008. State-run Petroleos de Venezuela SA (PDVSA) holds the remaining stake.

ONGC Videsh Limited (OVL) is the international arm of ONGC. It was rechristened on 15 June 1989. It currently has 14 projects across 16 countries. Its oil and gas production reached 8.87 MMT of O+oEG in 2010, up from 0.252 MMT of O+OEG in 2002/03. ONGC holds 100% stake in ONGC Videsh Limited.

“We will stand guarantee to raising of the USD 318 million capital required for investing in the San Cristobal project,” OVL CEO and Managing Director Narendra K Verma said.

OVL and Venezuelan state oil company PDVSA signed the deal on Friday to finance increased crude production at the joint venture Petrolera Indovenezolana, SA, which operates the San Cristobal oilfield.

The financing will help boost production at San Cristobal field to 30,000-35,000 bpd from current 19,000-20,000 bpd, he said.

Verma said PDVSA has agreed to supply 17,000 bpd of crude oil till repay USD 537 million it owes to OVL.

“The crude oil will be supplied till such time that the dues are fully cleared,” he said.

OVL has not been paid for its share of oil from the San Cristobal field in last few years.

San Cristobal project covers an area of 160.18 square kilometers in the Zuata Subdivision of proliferous Orinoco Heavy Oil belt in Venezuela. The field output is down from a peak of 38,000 bpd.

OVL had received its dividend from sale of crude oil produced from the field totaling USD 56.224 million for 2008.

But dividends for 2009 to 2013 totalling USD 537.631 million remained unpaid due to cash flow difficulties being faced by PDVSA.

“What we have signed is basically a very good deal. It will help raise production as well as clear our outstanding,” said Verma, who was in Caracus for the signing of the deal last week. During 2015-16, OVL’s share of crude oil production was 0.585 million tonnes as compared to 0.645 million tonnes during the previous fiscal. It’s share of investment in the project was Rs 2,599.71 crore (USD 486.69 million) till March 31, 2016.

Venezuela, the cash-strapped OPEC member and holder of the world’s biggest oil reserves, has been unable to pay foreign partners on some of its projects as revenues slumped along with crude prices and as funds were diverted to social programme and fuel subsidies.

The Latin American nation earns almost all of its export revenues from oil.

It is already repaying loans outstanding to China with crude and OVL was keen on a similar deal. Venezuela is India’s fourth largest source of crude oil, supplying some 23.6 million tonnes or 12 per cent of the country’s annual import in 2015-16.

OVL, along with Indian Oil Corp (IOC) and Oil India Ltd, also holds 18 per cent stake in Venezuela’s Carabobo-1 project, which currently produces about 16,000 bpd of oil and is expected to reach 90,000 bpd by end of 2017.